2008 SCE FCU Annual Report

SCE FCU Found Creative Solutions for Members to Deal with Recession

2008 was a year of enormous swings and scary firsts for many in the financial industry and in our overall economy. They were far reaching, touching all of us in some way.

The Federal Reserve cut interest rates seven times: from 4% in January to a range of 0.0-0.25% in December

Oil peaked at over $135 in May and by December was trading below $40

Banking icons such as Wells Fargo started posting profit declines as early as January

Merrill Lynch announced a nearly $10 bn loss for Q4 2007 and continued to decline until it was finally purchased by Bank of America for $50 bn in September

AIG posted a $5.29 bn loss in February; US Government seized control of AIG in September and by November, the AIG bailout was up to $150 bn

Citigroup posted a $5.1 bn loss and GM a $3.25 bn loss in April

Lehman Bros lost $2.8 bn in June and filed for Chapter 11 in September

Wachovia reported a record loss of $8.9 bn and Ford a loss of $8.7 bn in July

FDIC seized IndyMac on July 11, and by the end of the month, 2 additional banks closed for a total of 7 by mid 2008

Unemployment climbed to 6.1% by September and reached 6.7% by December

Fannie & Freddie were placed into conservatorship in September

The Senate passed the $700 bn “Bailout Bill” on October 2, during the worst week for stocks since 2001. On October 6, the Dow finished below 10,000 for the first time since October 2004. The Dow fell to 7,997 on November 19

US homeowner equity fell below 50%, the lowest since 1945; foreclosures rose dramatically and by Q3, mortgage delinquencies were up to 6.99%

Consumer confidence ratings fell from 88.6 in early January to 38 in October

The National Bureau of Economic Research announced in December 2008 that the US economy had been in recession since December 2007

Was there a silver lining anywhere? A ray of hope? Some good news? For many, the Olympic victories in August were a welcome distraction and a reason to celebrate. For others, the election of the first African American to the Presidency in November was a momentous event and a reminder that democracy is alive and well in the U.S.A.

For SCE Federal Credit Union, our focus was to find creative ways for our members to adjust to the new economic realities. Our first priority was to let you know that we are well positioned to weather this storm with you, that your deposits are safe, and that we have money to lend during a time when credit is hard to get and local and national financial institutions with long, stable track records are going out of business. We met with many of you to restructure your mortgages so that you could afford to stay in your homes. We offered free education and counsel through our Balance program for those of you who wanted some assistance with budgeting, financial planning or debt restructuring. A very popular “road trip” loan promotion gave away a 3 day-2 night getaway with every auto loan of $10,000 or more, giving you an opportunity to reduce your car payment and relax for a few days on us.

You responded and total loans grew to $287.2 million and shares grew to $334.5 million, both new highs. Capital however, declined from $46.6 million to $41.5 million due to $5.3 million in “stabilization” expenses stemming from significant losses suffered by two large corporate credit unions, Wescorp and U.S. Central. As a Federally insured Credit Union, we are obligated to contribute funds to replenish the National Credit Union Share Insurance Fund (NCUSIF) and 2008’s results reflected $3.2 million towards that effort. Additionally, we were required to write down our $2.1 million investment in Wescorp, in anticipation that Wescorp’s investment losses would exceed the collective member capital shares. The silver lining is - we were in an excellent capital position (11%) prior to this event, and we are still at 9%, well above the 7% considered to be wellcapitalized by our regulatory agency. Furthermore, due to recently passed Federal legislation, it is likely that most of the $3.2 million expense will be reversed sometime during 2009.

We stepped away from a merger opportunity that we brought to you mid year, because our due diligence suggested that our organizations may not blend well and this would be a distraction rather than a benefit to our membership. The silver lining from that experience was the purchase of a new corporate building at an outstanding price. We anticipate a move by fall of 2009 and this will once again allow all of our corporate staff to operate under one roof! Our new home is one block away from our existing home, and we can’t wait to introduce you to it. Amidst all of the daunting economic news of 2008 and the somber forecasts for 2009, you can always count on SCE FCU to be here for you.

To our members who are participating and benefiting from our competitive services and prices, we thank you and applaud you for taking advantage of all of the benefits of your cooperative. We do realize that some of you may be caught in this financial crisis and may have less than desirable loans with other financial institutions. We would like to remind you that we are your Credit Union and we will help you in any way we can to make it through this difficult time.

To our volunteers on our Board of Directors, Supervisory Committee and other Board Committees, we thank you for your commitment and your invaluable contribution.

To our employees who not only work hard to serve members but also believe in serving the community, we thank you for contributing 846 volunteer hours in 2008 with a wide variety of local organizations and for facilitating 61 financial education workshops reaching 1,253 participants.